Boundary Wall Delay and Liquidated Damages
A property developer contracts a builder to construct a 220 m boundary wall and gatehouse for PKR 18 million in 90 days. The contract makes time of the essence and sets liquidated damages at PKR 50,000 per day. The developer delays handing over the site by 20 days because a utility connection is unresolved. During excavation, the builder encounters 60 m³ of unexpected reinforced concrete from an old foundation, which takes 15 days to remove. The contract has a force majeure clause covering 'acts of God, war, and government requisition' but no ground-conditions clause. The builder gives no written notice of delay until the final week, although the contract requires notice within 7 days of a delaying event. The work finishes 35 days late. The developer deducts PKR 1.75 million. The builder claims the full amount back and threatens arbitration.
1. Assess the builder's entitlement to an extension of time for the late site possession and for the unexpected concrete.
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The site-possession delay is the developer's responsibility. By failing to give possession for 20 days, the developer prevented the builder from proceeding; the builder is entitled to an extension of time for that period, and liquidated damages should not run. The unexpected concrete is different. The contract has no ground-conditions clause and the force majeure clause is limited to acts of God, war, and government requisition. On the face of the contract, the risk of unforeseen ground conditions sits with the builder. The builder might argue that the concrete was a variation or that the developer impliedly warranted the site, but that is weaker.
The notice clause is a separate obstacle: the builder gave no written notice within 7 days. If the contract makes notice a condition precedent, the builder may lose even the site-possession claim. A tribunal may enforce the notice requirement strictly, though it may be reluctant to let the developer benefit from its own delay.
2. Calculate the maximum defensible liquidated damages and advise the builder on how much to claim.
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Start with the 35-day total delay. Excuse the 20 days caused by late possession, subject to the notice issue. That leaves 15 days of culpable delay. At PKR 50,000/day, the maximum defensible liquidated damages are 15 × 50,000 = PKR 750,000. The developer deducted 1.75 million, which is 35 × 50,000. On that calculation, 1.0 million was over-deducted and should be returned, but only if the builder's notice failure does not bar the extension. If the notice clause is a condition precedent, the builder's recovery may be limited or lost, and the full deduction could stand. The 15 days for the concrete are not excused absent a clause. The builder should not demand the full 1.75 million back; a realistic claim is 1.0 million plus interest and costs, while the developer should concede the 20 days only in exchange for resolving the notice point.